Finding Stocks at a Fever Pitch

The collective power of thousands of investing minds is the driving force behind Motley Fool CAPS, a leading investor-intelligence community. Membership has grown to more than 100,000 investors: professionals, novices, and every level in between.

One of the service's unique features is that it lets players not only rate a company on whether they think it will outperform or underperform the market, but to express why they think it will, in as much detail as they want. These analyses, or "pitches," can be as simple as "This stock has a low P/E ratio," or as complicated as a multi-page, footnoted thesis. In the context of the overall assessment of the stock, a pitch is another data point to consider.

Throwing strikes
Useful analyses are those that give salient details about a company and its prospects -- on both the bull and bear side -- and the best ones earn recommendations. We call the investors who merit the most recommendations for their analyses our "pitch-writing superstars." Let's look at these top investors and some of their best recommendations and get a sense of what makes up strong analyses and winning investing.

tenmiles is not only a top pitcher who's received 388 recommendations so far for his pitches, he's also a top-rated All-Star who's racked up a 99.92 player rating while achieving 83% accuracy on his picks. Here are a few of tenmiles' most recent stock picks. (His pitches are succinct, so dig right in.)

Source: CAPS. Score is the amount of points by which a particular call is beating (lagging) the S&P 500 since the time of the call.

The Bernanke bungle
It seems not enough can be said of how Fed Chairman Ben Bernanke has made a complete and utter mess of the financial industry in this country by doing both too much and too little at different times. Like Milton Friedman's fool in the shower who scalds himself by opening the spigot too fast without waiting for the temperature to adjust, Bernanke and his Treasury-secretary counterpart, Henry Paulson, are burning taxpayers by giving big bucks away to not only investment bankers like Lehman Brothers, but also to a vast array of brokerage houses, mortgage interests, and housing institutions.

Lehman already teeters on the brink of insolvency, and CAPS member dutchburger thinks industry strain will perhaps be too much for it:

Too much bad publicity and shorting of the stock will scare potential high profile customers that Lehman needs to be successful. With its ultra high leverage in combination with the stress on the global financial system, this company will have difficulty to survive.

Envisioning profits
All it took was an announcement that revenue was off and that a charge would be taken for fouled chips, and shares of graphics-chip maker NVIDIA plummeted. With the shakeout comes renewed opportunity, though, for this best-of-breed manufacturer. While there is indeed strong competition coming online for this Motley Fool Stock Advisor recommendation, the sell-off puts its valuation at just nine times 2009 earnings. Moreover, its enterprise value-to-free cash flow ratio of 16 makes it equally attractive, since much of the bad news was immediately priced in -- it historically trades at almost three times that level.

CAPS investor Nebelum feels that the chip maker will be able to maintain its market-dominating position:

A reduced revenue forecast plus manufacturing blunders made this stock drop almost 50% in the span of a day or two. Despite the fact that demands for performance graphics card may not be at an all time high (competition from console based gamings has converted a lot of PC gamers), nVidia also does have vested interest in Sony Computer Entertainment's PS3 (the RSX is designed by nVidia, and Sony does pay a royalty fee per unit of PS3 sold), which has been outselling it's competitor XBox 360 for the past two months (about time, really).

Inside pitches
Now, an All-Star investor's top-recommended pitch isn't enough to base a buy or sell decision on. You need to perform your own due diligence. But it's worth considering what the All-Stars have said as you make your decision.

A Foolish stance
Step up to the batter's box of Motley Fool CAPS and make your opinions known. Since CAPS is a completely free service, throw as many pitches as you like at the stocks of your choice. You'll be helping your fellow investors make better investing decisions.